Question

Completing a comprehensive budgeting problem—merchandising company Alliance Printing Supply of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for April 2018 and a balance sheet at April 30, 2018. The March 31, 2018, balance sheet follows:

As Alliance Printing Supply’s controller, you have assembled the following additional information:

a. April dividends of \(7,000 were declared and paid.

b. April capital expenditures of \)16,300 budgeted for cash purchase of equipment.

c. April depreciation expense, \(1,000.

d. Cost of goods sold, 40% of sales.

e. Desired ending inventory for April is \)22,400.

f. April selling and administrative expenses include salaries of \(37,000, 30% of which will be paid in cash and the remainder paid next month.

g. Additional April selling and administrative expenses also include miscellaneous expenses of 10% of sales, all paid in April.

h. April budgeted sales, \)89,000, 80% collected in April and 20% in May.

i. April cash payments of March 31 liabilities incurred for March purchases of inventory, \(8,600.

j. April purchases of inventory, \)8,600 for cash and $37,400 on account. Half the credit purchases will be paid in April and half in May.

Requirements

1. Prepare the sales budget for April.

2. Prepare the inventory, purchases, and cost of goods sold budget for April.

3. Prepare the selling and administrative expense budget for April.

4. Prepare the schedule of cash receipts from customers for April.

5. Prepare the schedule of cash payments for selling and administrative expenses for April.

6. Prepare the cash budget for April. Assume the company does not use short-term financing to maintain a minimum cash balance.

7. Prepare the budgeted income statement for April.

8. Prepare the budgeted balance sheet at April 30, 2018.

Short answer

1. Total sales is $89,000
2. Budgeted purchases are $46,000
3. Selling and administrative expense $45,900

The schedules are given below.

Step-by-step solution

Preparation of sales budget 

ALLIANCE PRINTING SUPPLY Sales Budget For the April, 2018
	April
Total budgeted sales	$89,000

Preparation of production budget

BURTON OFFICE SUPPLY Inventory, Purchase, and Cost of goods sold Budget For the first quarter, 2019
	April
Cost of goods sold	$35,600
Plus: Desired ending inventory	$22,400
Total merchandise inventory required	$58,000
Less: Beginning merchandise inventory	$12,000
Budgeted purchases	$46,000

Preparation of selling and administrative expense budget

ALLIANCE PRINTING SUPPLY Selling and Administrative Expense Budget For the April, 2018
	April
Fixed Expenses:
Salaries	$37,000
Miscellaneous	$8,900
Total	$45,900

Preparation of schedule of cash receipts from customers

ALLIANCE PRINTING SUPPLY Schedule of cash receipts from customers For the April, 2018
	April
Total Sales	$89,000
Cash receipts from customers (80% of Sales)	$71,200
Cash receipts from last quarter	$19,000
Total cash received from customers	$90,200

Preparation of schedule of cash payments

ALLIANCE PRINTING SUPPLY Schedule of cash payments from purchases For the April, 2018
	April
Total purchases	$46,000
Cash payments:
Cash purchases	$8,600
Credit purchase (50%)	$27,300
Total cash paid	$35,900

Preparation of schedule of cash payments

ALLIANCE PRINTING SUPPLY Schedule of selling and administrative expenses For the April, 2018
	April
Salaries	$11,100
Miscellaneous (10% of sales)	$8,900
Total	$20,000

Preparation of schedule of cash budget

ALLIANCE PRINTING SUPPLY Cash Budget For the April, 2018
	April
Opening cash balance	$50,700
Cash receipts	$83,800
Cash paid for purchases	$35,900
Cash paid for expenses	$20,000
Cash ending balance	$78,600

Preparation of operating income

ALLIANCE PRINTING SUPPLY Income Statement For the April, 2018
	March Quarter
Net sales revenue	$89,000
Cost of goods sold	$35,600
Gross profit	$53,400
Selling and administrative expenses	$45,900
Depreciation	$1,000
Operating income	$6,500

Preparation of Balance sheet

Bradley Inc. Budgeted Balance Sheet For the first quarter, 2019
Assets
Current Assets:
Cash	$78,600
Accounts Receivables	$33,300
Total current assets		$111,900
Property, plant, and equipment
Equipment	$96,800
Less: Accumulated depreciation	($13,900)	$82,900
Total Assets		$194,800
Liabilities
Current Liabilities:
Accounts payable	$51,100
Stockholder’s Equity
Common stock, no par	$38,000
Retained earnings	$105,700
Total stockholder’s equity		$143,700
Total liabilities and stockholder’s equity		$162,400